Why is SEC Suing Coinbase (COIN) But Not Binance

YEREVAN (CoinChapter.com) — The US Securities and Exchange Commission (SEC) is back to haunt the crypto industry.

The agency may soon take enforcement action against one of the biggest exchanges, Coinbase (COIN). According to the company, the SEC has accused them of listing potential unregistered securities and has issued them a Wells notice.

But the question that hasn’t skipped the attention of critics is why the SEC is suing Coinbase but not Binance (BNB), the largest crypto exchange in terms of the daily trading volume.

According to the stipulated procedure, the SEC sends a Wells Notice at the end of an investigation as a formal communiqué informing the recipient that it plans to take action against it. The recipient (in this case, Coinbase) has a 30-day period to respond in the form of a Wells Submission. 

 “The staff of the Securities and Exchange Commission has made a preliminary determination to recommend that the Commission file an enforcement action against your client, Coinbase, Inc.,”

 the SEC notice addressed to Coinbase lawyer Steven Peikin of the Sullivan & Cromwell LLP reads. 

Coinbase CEO Brian Armstrong shared the news on Twitter. While slamming the SEC for its bizarre action, the crypto entrepreneur also welcomed it as an opportunity to make another push for crypto regulation.

He also claimed this to be a chance to bring the issue before the court with the hope of a positive outcome.

“Going forward the legal process will provide an open and public forum before an unbiased body where we will be able to make clear for all to see that the SEC simply has not been fair, reasonable, or even demonstrated a seriousness of purpose when it comes to its engagement on digital assets,” 

Armstrong wrote in a Twitter thread.

The action of SEC was planned with ulterior motives

It is no secret that SEC Chief Gary Gensler and his team are after the cryptocurrency industry.

His anti-crypto actions have made him a disliked figure among industry players, and rightly so. However, his latest action against Coinbase is so derived from logic and honesty that one cannot help but see right through it. 

For starters, if the cryptocurrency exchange did not meet SEC’s regulatory standards, why did the agency allow it to go public in early 2021? After reviewing the business in detail, it gave the company the green light. So why did it not stop them, then? 

Moreover, the SEC has failed to provide any conclusive guidelines regarding the security of cryptocurrencies.

For its part, as the Coinbase (COIN) CEO points out, the company has implemented an internal vetting process. It has refused to accept 90% of the tokens that have applied to be listed on the platform. A large chunk of these could arguably have been those that could be seen as securities. 

To make this sham even more evident, the SEC has failed to provide any reasonable crypto rules for the industry. In all fairness, it should be mentioned that Coinbase was one of the largest players asking for fair rules and sensible regulations.

To attack the company, especially while protecting the bigger fish Binance, is suspicious. 

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Why not guide the industry instead of creating obstacles, SEC?

If the Securities and Exchange Commission was so serious about its role, why did it not use all these years to guide the industry? Instead, the working pattern of Gary Gensler has one of intimidation and obstruction. 

Instead of engaging with the major players with an open mind, it has instead looked to find enemies among them. As Paul Grewal, Chief Legal Officer at Coinbase, points out, “the SEC is considering courts over constructive dialogue.”

“Over the past 9 months, CB has met with the SEC more than 30 times, sharing details of our business to build a path to registration. During this time, the SEC has given basically 0 feedback on what to change, or how to register. Instead, today we received a Wells notice,”

 Grewal said. 

The company has registered with regulators in other countries, including Singapore, Ireland, Australia, and Germany. However, without a proper definition and guidelines, the SEC is trying to portray its failure on Coinbase and other crypto exchanges. 

Why is the SEC not suing Binance? 

The fact that the SEC has opted to go after Coinbase leaving the larger player, Binance, untouched, is also an issue. Although it initiated an investigation into Binance years ago, it is yet to take any concrete actions on a large scale against it. 

Many in the industry have constantly pointed out that Binance has broken the rules and acted with unmatched impunity. Any unbiased regulator would pay more attention to the functioning of this mammoth before even looking at other exchanges. 

AJ Nelson, the Co-Founder and President of Bahrain-based crypto exchange Rain, also shared similar sentiments. Expressing his disbelief that the SEC is going after Coinbase but not Binace, Nelson wrote, 

“For years Coinbase has followed the rules and done everything right. Conversely Binance has broken all the rules and not cared. What did the regulators just teach us?” 

he wrote. 

The CEO of Rain also pointed out that Binance US, the United States branch of the firm, served customers without doing any KYC. This, according to him, is one example of several violations. 

Many of his followers also agreed with Nelson. Some even alleged that Binance had bribed US officials to look away. 

It is too early to speculate, but Coinbase seems confident that it can win the court case should it come to it. But, unfortunately, the Securities and Exchange Commission does not want to end its witch-hunt.